History of SEIS

The Seed Enterprise Investment Scheme (SEIS), introduced in the Chancellor George Osborne’s 2011 Autumn Statement, is a tax-friendly financing scheme allowing start-ups to find a route to equity finance. It offers great tax efficient benefits to investors in return for investment in small and early stage start-up businesses in the UK.

Some benefits for investors:

Receive 50% tax relief on initial investment as long as investment doesn’t exceed £100,000 per tax year

Allowed to carry back the tax relief to the prior year

CGT gains release where 50% of gains are treated as exempt but the investor must invest 100% of the investment. Unusually, this will apply to any asset, including Residential Property.

Disposal relief: no CGT on the SEIS shares as long as they have met the minimum 3 year holding period requirement

SEIS eligibility criteria

As with all tax schemes, the following criteria must be met by the company.

Company must be unquoted (not listed on the Stock Exchange)

Company must be independent

Company must have less than 25 employees

Company must be a new business, less than 2 years old

Company must have less than £200,000 in gross assets (before the investment)

Overall SEIS investment must not exceed £150,000

Company must not have previously raised money under EIS or venture capital trust (VCT) schemes.

Sectors excluded from SEIS

Most trade like Retail and Health & fitness qualify. However, the company must also not be an excluded trade. Some examples:

Financial activities

Legal and accounting

Property development

Farming

Dealing in land and shares

Nursing homes

Operating hotels

There are additional excluding trades and a list can be found here: https://www.gov.uk/guidance/seed-enterprise-investment-scheme-how-companies-qualify.

SEIS Investors criteria

Investors must meet some criteria in order to qualify for the benefits received through investing via SEIS. They are the following:

Investor must be over 18

Investor must not have a substantial equity stake in the company. 30% or less

Investor must hold shares for minimum of 3 years

Company must remain compliant with SEIS

SEIS can’t be use to avoid tax

All shares must be bought in cash or paid in full

The investment must not be financed by loan

When determining if the investor has more than 40%, associated persons must be included. For the purpose of associated people the following would apply:

Spouses/Civil partner

Grandparents, Children, Parents, Grand children

Business partners (For this purpose it would only include people in partnership)

The investor may not be employed by the firm, unless as a director

Summary:

People with existing businesses can start new companies for new ventures that they might have as long as the trade isn’t the same as the previous organisation. There are various rules to consider before you can apply with the SEIS scheme. It’s recommended you speak to us before setting up any companies as the business owners may be entitled to SEIS tax relief on their shareholding if they structure the setup correctly.

Those businesses that wish to know more, we recommend you setup a half-hour free consultation with ourselves either in person or over the phone.